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How Mortgage Lender Underwriting Works

How Mortgage Lender Underwriting Works

  • Once the lender receives your complete mortgage application including all of your personal financial information and documents, your application is submitted to the lender's internal underwriter for review.  You can think of the lender's underwriter as an investigator who carefully examines your application as well as all the appraisal and title reports and all the personal and financial documents you provided.  The underwriter's goal is to make sure that the information you submitted regarding your income, assets and employment is accurate and complete and that you have the ability to afford the mortgage payment and ultimately pay back the loan.

    The lender underwriting process focuses on the borrower's credit worthiness and financial profile and makes sure that applicant meets the lender's mortgage qualification guidelines. The underwriter also reviews the appraisal report to make sure there are no significant issues with the property that need to be addressed prior to closing. Additionally, the underwriter examines the title report to identify any unresolved ownership claims, easements or exceptions to title that require an explanation or resolution. In short, the underwriter represents the lender's interests and ensures that you are a qualified applicant.

    The underwriter is supposed to provide an objective assessment of your application and ability to qualify for the mortgage. The lender's underwriter usually never interacts directly with the applicant and unlike a loan officer or customer-facing banker, the underwriter has no relationship with the borrower.  Additionally, the loan officer or banker usually have minimal ability to influence underwriter and push your approval through if the underwriter rejects it.  This is intentional as the underwriter is supposed to be unbiased. So although you may never talk to the underwriter assigned to review your loan application, he or she plays a very important role in the mortgage process.

    Your application is assigned to one of the lender's approved underwriters who processes the file and either approves, approves with conditions or rejects your application.  If your application is rejected, the mortgage process with that lender is usually over although you can try to work with a different lender depending on the reason for the rejection.  If your mortgage application is approved, you are cleared to fund and close your loan.

    The underwriter may have questions about your mortgage application or request addition documentation to provide final underwriting approval. These additional underwriter requests are referred to as "prior to document" requirements because they must be satisfied before your loan moves from the underwriting phase of the mortgage process to the funding phase. As an example, the underwriter may request additional tax returns, more extensive employment information or more detailed bank or brokerage account statements.

    It is unusual for the underwriter to approve your application without requiring additional information or clarifications. In many cases the application is approved but is subject to certain conditions that must be satisfied before your mortgage closes. Conditions to close may include providing additional financial information or personal documents, explaining an issue on your credit report, addressing items in or exceptions to the title report or fixing a property issue found in the appraisal report.  As a borrower, you want resolve these conditions to close as soon as possible so that your mortgage can fund on time.

    The lender underwriting review and approval process can take between three or four days to up to four weeks or more depending upon market conditions and the lender's internal process.  Additionally, a high number of follow-up questions, conditions to close or "prior to document" requirements can extend the underwriting process depending on the type of information the underwriter requests and the responsiveness of the borrower.  It is prudent to add some cushion to your mortgage timeline to account for an extended underwriting process.  Also, if you decide to lock your mortgage, make sure that your rate lock period takes into account the time required to receive lender underwriting approval.  After you have resolved all of the prior to document conditions, the underwriter provides final mortgage approval which enables you to move to closing stage of the mortgage process and ultimately fund your loan.

  • Rate Details*
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    Points  More Info:
    Points: Fees you are willing to pay in order to get a lower interest rate. The number of points refers to the percentage of the loan amount that you would pay. For example, "2 points" means a charge of 2% of the loan amount.
    Total Lender Fees:  
    Loan type:  
    Property Value:  
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    Credit Rating:  
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    Monthly Housing Payments
    P & I More Info
    Principal & Interest: A periodic payment, usually paid monthly, that includes the interest charges for the period plus an amount applied to the reduction of the principal balance.
    Mortgage Insurance More Info
    Mortgage Insurance: The monthly cost for a policy that protects the lender in case you’re unable to repay the full amount of the loan. It is typically required for loans that have a loan-to-value ratio between 80% to 100%.
    Property Tax More Info
    Property Tax: (Also called "Real Estate Tax.") Property taxes are government assessments on real estate property. With mortgage financing, the local, county or state tax assessment on real estate property is considered part of the monthly housing obligation and typically collected and set aside by the lender ...
    Homeowner Insurance More Info
    Homeowner Insurance: or also commonly called hazard insurance, is the type of property insurance that covers private homes. It is an insurance policy that combines various personal insurance protections, which can include losses occurring to one’s home, its contents, loss of its use, or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home or at the hands of the homeowner within the policy territory.lender ...
    Homeowner Association Fee More Info
    Homeowner Association fee: (HOA) fees are funds that are collected from homeowners in a condominium complex to obtain the income needed to pay (typically) for master insurance, exterior and interior (as appropriate) maintenance, landscaping, water, sewer, and garbage costs.
    (If Any)
    Total Monthly Housing Payments
    Lender Fees
    Points More Info
    Points Fees you are willing to pay in order to get a lower interest rate. The number of points refers to the percentage of the loan amount that you would pay. For example, "2 points" means a charge of 2% of the loan amount.
    Origination Fee More Info
    Origination Charge: A loan origination charge is a fee charged by the lender for evaluating, processing, and closing the loan.
    Credit Report Fee More Info
    Credit Report Fee: Fee charged to obtain an applicant’s credit history prepared by one or all of the three major credit bureaus. Used by lender to determine the borrower’s creditworthiness.
    Tax Service Fee More Info
    Tax Service Fee: A fee charged by the lender to cover the cost of retaining a tax service agency. These agencies monitor the property tax payments on the property and report the results to the lender.
    Processing Fee More Info
    Processing Fee: A processing fee is a charge by the lender for clerical items associated with the loan. Examples of processing include loan set up, organization of loan conditions for underwriting, and preparing required disclosures for the borrower.
    Underwriting Fee More Info
    Underwriting Fee: A fee charged by the lender to verify information on the loan application, authenticate the property’s value, and perform a risk analysis on the overall loan package.
    Wire Transfer Fee More Info
    Wire Transfer Fee: In most cases lenders wire funds to escrow companies to fund a loan. Commercial banks that perform this function will charge the lender so the fee is generally passed on to the borrower.
    (If Any)
    FHA Upfront Premium More Info
    FHA Upfront Premium: A fee paid in cash at the close of escrow or more commonly it is financed into the loan. These premiums are pooled together by the FHA and are used to insure the risk of borrower default on FHA loans. FHA upfront premiums are prorated over a five year period, meaning should the homeowner refinance or sell during the first five years of the loan, they are entitled to a partial refund of the FHA upfront premium paid at loan inception.
    (If any)
    VA funding Fee (If any)
    Flood Fee
    Other Fees More Info

    Other fees could be either additional Administrative Fees that a lender charges or it could be a Flat Fee to cover all lender charges such as: (Origination Fees, Points, Underwriting and Processing Fees, Credit Reports and Tax Service Fees)

    The flat fee does not include prepaid items and third party costs such as appraisal fees, recording fees, prepaid interest, property & transfer taxes, homeowners insurance, borrower’s attorney’s fees, private mortgage insurance premiums (if applicable), survey costs, title insurance and related services.

    Total Lender Fees
    *Actual rates and other information may vary. Sponsored results shown only include participating lenders. The information you enter on this page will only be shared with lenders you choose to contact, either by calling the phone number or requesting a quote.
    Current Mortgage Rates as of December 11, 2018
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    Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. The actual payment obligation will be greater if taxes and insurance are included. Click here for more information on rates and product details.
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About the author

Harry Jensen, Mortgage Expert

Harry is the co-founder of FREEandCLEAR. He is a mortgage expert with over 45 years of industry experience. Over his career, Harry has closed thousands of loans for satisfied borrowers and now offers his advice and insights on FREEandCLEAR. More about Harry


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